As elaborated on previously, the purpose of this dissertation is to investigate how firms organize for pricing. In this chapter, the organizing perspective, developed from various sources and forming the overarching theoretical framework of this dissertation, is presented. This is followed by the derivation of a preliminary framework of organizing for pricing, which is strongly based on and connected to the conducted literature review. Furthermore, a short recap of the identified research gaps is given and the different theories of this dissertation are reflected upon.
Several authors have recognized organization as a verb and a noun (Bakken & Hernes, 2006;
Weick, 1979). Organizing emphasizes the process perspective (Langley & Tsoukas, 2010), as organizations “are a complex set of social processes” (Scott & Davis, 2015, p. 7). Generally, it is argued that one should talk about organizing rather than organization (Weick, 1979). Using the gerund (-ing) shows the ambition to move towards a more dynamic perspective for investigating organizational phenomena (Langley & Tsoukas, 2010). As argued by Hernes (2008), organizing
“implies attempts at creating a meaningful and predictable order out of a tangled world” (p. xiv).
Although organizing stresses the process perspective, structures are also mentioned in this regard. Employees, for example, are restricted by structures, but they also make use of and modify them through organizing (Scott & Davis, 2015). However, organizing goes beyond structure. It can be a solid “thing” but also a process, meaning that organization is the result of a process, namely organizing, that occurs in time and requires day-by-day enactment (Grey, 2012).
Because of this, Whittington and Melin (2003) argued, the success of a firm lies not just in having the right strategy and structure in place, but in possessing the required capabilities to be continuously reinventing them. In other words, the organizing approach “does not deny the existence of events, states, or entities, but insists on unpacking them to reveal the complex activities and transactions that take place and contribute to their constitution” (Langley &
Tsoukas, 2010, pp. 2–3). Hernes and Weik (2007) explained that in a recursive interpretation the current form of the organization is the foundation for organizing. Hence, the current state contains the history of past events, experiences and structures, which are taken up into the present, and which provide “a basis from which organizing processes are projected into the future” (Hernes &
Weik, 2007, p. 261).
To study the phenomenon in question then, the organizing perspective in this dissertation acknowledges processes of pricing: “the organization of the organization, so to speak” (Grey,
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2012, p. 15), only in terms of pricing. However, it also considers the less fluid and temporary forms of the components of pricing.
Whereas organizing is the overall perspective taken in this thesis, the three studies apply different theoretical lenses that pertain to the specific elements of organizing being studied. The theoretical approaches used in each study are described and discussed in greater detail in their respective chapters: chapters 6, 7 and 8.
Preliminary framework on organizing for pricing
One can derive from the literature review that when investigating how firms organize for pricing, the following may need to be considered: practices and activities in relation to information being used, roles of the involved actors and systems, capabilities, and the structures and levels of pricing authority. However, as discussed in the previous section, one should not simply look at the current and accomplished entities and states but should also unravel how these are evolving and how they affect processes and interactions. For the purpose of this thesis then, organizing for pricing is defined as an information-intense process, characterized by the deployment of practices and activities, actors and systems, and capabilities within organizational structures and levels of authority.
Figure 3.1 illustrates the elements of organizing as derived from the literature review. The dashed line with regard to structure and authority indicates that even though pricing structures and the delegation of authority shape the boundaries and determine the frame of the other elements, it is believed that it is also those elements that may reorganize and newly define such structure and authority. The second dashed line referring to information illustrates that the information, which is taken as an input into the pricing process, is being processed by the elements to lead to the sales price decision.
Figure 3.1: Preliminary organizing for pricing framework.
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Recap on potential areas for contribution
In the literature review it was demonstrated that pricing processes are complex and that challenges are likely to be encountered. A research gap on organizing for pricing was identified and was outlined as a promising field for further research. As of now, empirical pricing research is limited in this regard (Carricano et al., 2010; Homburg et al., 2012; Liozu, 2015; Rao & Kartono, 2009).
The reviewed literature streams provide valuable and critical insights but also point to limitations in the overall identified knowledge gap. Given the outlined importance and the lack of expertise in both managerial practice and academia, this dissertation aims to address this gap to further enhance our understanding of this phenomenon. The more specific knowledge gaps and potential areas for contribution within the realm of organizing for pricing are briefly summarized next.
Practice and activities
A focus on studying practices, which are hidden inside the firm (Ingenbleek & van der Lans, 2013) potentially leads to new and more detailed insights on how companies organize for pricing.
It is believed that more practice research is needed, particularly at a more micro level. Only in this way can the practice lens depict “the fine details of how people use the resources available to them to accomplish intelligent actions, and how they give those actions sense and meaning” (Gherardi, 2012, p. 2), and thus, potentially lead to in-depth pricing insights.
Actors and systems
Organizations are made up of people, who act as decision-makers in pricing and live the pricing processes. They are therefore an important element of organizing. Based on the literature, it can be said that further research on the more cognitive and psychological aspects would enhance our understanding of the actors in pricing processes (Hinterhuber & Liozu, 2015, 2017). Furthermore, the literature thus far is rather sparse on how the individuals involved in pricing decisions interact with each other to reach price decisions. In this vein, it is worth highlighting that studying IT-based systems as commercial decision resources is a promising area for future research (Hallberg, 2017a).
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Capabilities
Reflecting on the research on pricing capabilities has, in a detailed way, enhanced our understanding of firms’ pricing processes and of what it takes from a capability perspective to make pricing more successful in organizations. Pricing capability research is mostly concerned with the needed and desired pricing capabilities for specific purposes, such as value-based pricing or increasing firm performance (e.g., Hinterhuber, 2004; Liozu, Hinterhuber, & Somers, 2014).
However, it appears that pricing capabilities are mostly discussed as being fully developed and as
“in use” in practice, and we lack understanding of how firms go about adapting and reconfiguring such capabilities. In other words, pricing capabilities are thus far mostly considered with regard to their operational purposes. Based on the insights from the literature, considering the dynamic and operational nature of pricing capabilities is crucial when examining how companies organize for pricing.
Structure and authority
As derived earlier, organizational structures and authority levels are a sort of operating frame and define boundaries. Although they are rather static, they do support and stabilize processes. They are integral to organizing, as initially described. Not considering them when studying how firms organize for pricing might eventually lead to less complete findings. Several authors have called for more research on delegation of pricing authority, particularly to create a better understanding of how sales price decision rights are actually centralized or delegated in practice (Balan, 2016).
In this regard, it also seems that using alternative lenses, next to agency theory, seems promising for further advancing in this field, with Homburg et al. (2012) being a prominent example here (Balan, 2016; Yuksel & Sutton-Brady, 2006). Furthermore, although structures and authority levels play a critical role in how firms organize pricing, definitions and modifications of structures and levels of authority are also outcomes of organizing, an area that is clearly underresearched with regard to pricing. While there is generally a lack of research on such means of governance and control in pricing (Hallberg & Andersson, 2013), we lack, even more, an understanding of how firms choose and develop organizational structures and authority levels.
Moreover, in line with Dutta et al. (2003) and others, pricing is seen as a social process.
Thus, a focus on static structures and the like neglects social features, such as behavior, interaction, conflict and learning. Further, authors have also pointed to the critical role of irrational and intuitive behavior that actually might positively influence firm performance (Liozu &
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Hinterhuber, 2013a). These social aspects are known to play important roles in pricing processes (Liozu & Hinterhuber, 2013b, 2013c; Hallberg, 2017b; Hinterhuber & Liozu, 2017) and seem to be critical in explaining how firms organize for pricing.
Reflection on theoretical lenses
In this section clarification is provided on the different kinds of theories that were introduced and discussed in the literature review (chapter 2) and this chapter on the organizing perspective (chapter 3). It is evident that some of these theories, such as agency theory or capability-based view, are rather normative, whereas other lenses are following a more practice and processual approach. The organizing perspective as mentioned earlier in this chapter is the overarching theoretical lens, but other theories are used to study particular elements in the respective papers, for instance the capability-based view for studying capabilities, which form an essential part of the organizing for pricing framework. For clarification, the focus on social relationships, interactions and processes will be key, also when investigating normative characteristics of pricing.
There are various normative and processual/practice studies that greatly contributed to the pricing domain. Given the nature and complexity of pricing, it is important not to disregard the rather fixed and normative characteristics, such as structures and capabilities. As highlighted earlier, they are an essential element as they affect interactions and processes. Leaving out processual elements, on the contrary, also means that important insights might not be captured.
The literature review has pointed towards the importance of including both normative and processual aspects for investigating how firms organize for pricing.
While not all scholars are supportive of a non-parsimonious theoretical or multi-paradigm approach, it needs to be highlighted that it is not the goal of this research to construct a theory which is internally coherent and parsimonious, but to create a better and more in-depth understanding of the phenomenon in question. It is believed that it is not worth losing the ability to capture the phenomenon in its complexity to achieve theoretical parsimony.
That is also why ruling out either the normative or processual aspects when studying phenomenon of organizing for pricing for the beauty of theoretical parsimony might come at a loss. Scholars in other fields, for example, Sil & Katzenstein (2010) on politics, have conceded that the phenomena they are studying are so complex and important that actually insisting on theoretical parsimony at an ontological level results in explanatory sacrifice.
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Overall, the organizing perspective presented in this chapter is somewhat similar as to what Lewis and Grimes (1999) considered paradigm bridging. Here, the term transition zone is introduced based on the example of structuration theory (Gioia & Pitre, 1990), where one does not separate between structuring processes and formal structures. Something very similar to what is also discussed in this thesis with regards to pricing structures and delegation of pricing authority.
Therefore, it is important to also consider and discuss normative theories in the literature reviews of the respective papers, particularly if they have been dominating the research domain as it is the case with pricing. Introducing then the organizing perspective as a potential transition zone also gives the opportunity and value of communicating across paradigms (Lewis & Grimes, 1999), and to illustrate to the reader that the “phenomena in question can legitimately be subject to various research strategies (Weaver & Gioia, 1994, p. 577). This also helps to establish a common ground, and to ensure that a dialogue may be created rather than opening a new separate, parallel path to study the same phenomenon.
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